Fortress Biotech, Inc. (FBIO) is a biopharmaceutical company with a unique and diversified business model focused on acquiring, developing, and commercializing pharmaceutical products. The company's strategy revolves around leveraging its extensive network of key opinion leaders to identify and evaluate promising products and product candidates, and then utilizing its in-house expertise to advance them through the development and regulatory approval process.
Company Overview and Strategy
Over the years, Fortress has built an impressive portfolio of subsidiaries and partner companies, each pursuing the development and commercialization of innovative biopharmaceutical products. The company's growth has been fueled by a combination of strategic acquisitions, in-licensing agreements, and the successful advancement of its own proprietary pipeline. Fortress has executed partnerships with some of the world's foremost universities, research institutes, and pharmaceutical companies, including City of Hope National Medical Center, Fred Hutchinson Cancer Center, Dana-Farber Cancer Institute, and Dr. Reddy's Laboratories, Ltd. Following the exclusive license or acquisition of intellectual property underpinning a product or product candidate, Fortress utilizes its business, scientific, regulatory, legal, and finance expertise to support its partners in achieving their goals.
Some key milestones in Fortress' history include the acquisition of Caelum Biosciences, Inc. by AstraZeneca in 2021 and the transfer of CUTX-101 (copper histidinate) for Menkes disease from Cyprium Therapeutics to Sentynl Therapeutics in 2023. Despite facing challenges common to the biopharmaceutical industry, such as the time and cost-intensive nature of drug development, regulatory hurdles, and competition from other treatments, Fortress has demonstrated its ability to identify, acquire, and advance promising assets. The company has also had to manage its reliance on third-party manufacturers, contract research organizations, and other service providers, as well as navigate its capital structure, including the assumption of debt and the need to raise additional funding to support its R&D activities.
History and Evolution
Fortress' history can be traced back to its inception in 2010 as Coronado Biosciences, Inc. The company initially focused on the development of novel immunotherapy approaches for the treatment of autoimmune diseases and cancer. In 2012, the company underwent a name change to Fortress Biotech, Inc., reflecting its evolving business strategy and diversification into a broader range of therapeutic areas.
One of Fortress' key strengths is its ability to identify and acquire promising product candidates. The company has established partnerships with some of the world's most prestigious research institutions, including City of Hope National Medical Center, Fred Hutchinson Cancer Center, and the University of Pennsylvania, among others. These collaborations have provided Fortress with access to a steady pipeline of innovative technologies and product candidates.
Financials and Liquidity
Fortress' financial position has been shaped by a mix of equity and debt financing, as well as the sale of subsidiaries and partner companies. As of September 30, 2024, the company reported cash and cash equivalents of $58.85 million, with total assets of $127.08 million. The company's debt profile includes a $50 million senior secured credit agreement with Oaktree Capital Management, entered into in July 2024, which replaced a previous $60 million credit facility.
For the fiscal year 2023, Fortress reported annual revenue of $84.51 million, with a net loss of $60.64 million. The company's annual operating cash flow was negative $128.23 million, and annual free cash flow was negative $136.32 million. In the most recent quarter (Q3 2024), Fortress generated revenue of $14.63 million, representing a 4% decrease compared to the same period in the previous year. This decrease was primarily attributed to a one-time $19 million payment received in Q3 2023 related to a licensing agreement that did not recur in 2024. The net loss for Q3 2024 was $12.87 million.
Fortress' liquidity position is reflected in its debt-to-equity ratio of 3.38, current ratio of 1.23, and quick ratio of 1.06. The company's subsidiary, Journey Medical Corporation, has a $25 million credit facility with SWK Funding LLC, of which $20 million was drawn as of September 30, 2024.
Portfolio and Subsidiaries
Fortress' diverse portfolio includes several publicly traded subsidiaries, such as Avenue Therapeutics, Inc. (ATXI), Checkpoint Therapeutics, Inc. (CKPT), Mustang Bio, Inc. (MBIO), and Journey Medical Corporation (DERM). These entities are focused on the development and commercialization of a wide range of therapeutic candidates, including oncology, dermatology, and rare disease products.
One of Fortress' key assets is its partnership with Journey Medical Corporation, which generates the majority of the company's operating income. Journey's dermatology product portfolio, which includes brands like Qbrexza, Accutane, Amzeeq, and Zilxi, has been a significant driver of Fortress' financial performance. However, this revenue stream is not without its challenges, as these products face competition from generic alternatives and potential pricing pressures.
Fortress has also made strategic investments in other promising subsidiaries and partner companies, such as Cyprium Therapeutics, which is developing a therapy for the treatment of Menkes disease, a rare genetic disorder. In December 2023, Cyprium completed an asset transfer agreement with Sentynl Therapeutics, a wholly-owned subsidiary of Zydus Lifesciences Ltd., which is responsible for the continued development and commercialization of the Menkes disease therapy.
Research and Development
The company's research and development efforts have yielded several late-stage product candidates, including Checkpoint's cosibelimab, an investigational anti-PD-L1 antibody for the treatment of metastatic or locally advanced cutaneous squamous cell carcinoma. In July 2024, the U.S. Food and Drug Administration (FDA) accepted Checkpoint's resubmission of the Biologics License Application (BLA) for cosibelimab, setting a Prescription Drug User Fee Act (PDUFA) goal date of December 28, 2024. Notably, cosibelimab received FDA approval in December 2024 for the treatment of advanced cutaneous squamous cell carcinoma.
Another key development for Fortress is the FDA approval of Emrosi (minocycline hydrochloride extended-release capsules) for the treatment of inflammatory lesions of rosacea in adults. Emrosi was developed by Journey in collaboration with Dr. Reddy's Laboratories, Ltd. and received FDA approval in November 2024. Journey is currently preparing for the commercial launch of Emrosi, which is expected in late Q1 or early Q2 2025.
Business Segments
Fortress Biotech operates in two reportable segments: Dermatology Product Sales and Pharmaceutical and Biotechnology Product Development.
The Dermatology Product Sales segment is primarily driven by Journey Medical Corporation's operations. For the three months ended September 30, 2024, this segment generated $14.63 million in net revenue, predominantly from the sale of Journey's branded and generic dermatology products. Qbrexza, a key product in this portfolio, saw a 29% year-over-year increase in net product revenue to $7.58 million, driven by additional volume due to Journey's continued marketing efforts and expanded access and coverage platforms. However, revenue from legacy products like Accutane, Amzeeq, and Zilxi decreased by a combined 30% compared to the prior year quarter, due to factors such as market competition, decreased unit sales volume, and higher coupon rebates.
The Pharmaceutical and Biotechnology Product Development segment encompasses the research, clinical development, and regulatory efforts for the company's various drug candidates across its subsidiaries and partner companies. For the three months ended September 30, 2024, this segment incurred $9.45 million in research and development expenses. Key developments in this segment include the advancement of Checkpoint's cosibelimab, Journey's Emrosi, Helocyte's Triplex cytomegalovirus vaccine, and Mustang Bio's CAR-T and oncolytic virus product candidates.
Challenges and Future Outlook
Fortress' growth strategy has not been without its challenges, as the company has faced headwinds related to the ongoing COVID-19 pandemic, which has disrupted clinical trial activities and supply chain operations. Additionally, the company has encountered setbacks in the development and regulatory approval of certain product candidates, which have impacted its financial performance.
In 2021, Journey was the victim of a cybersecurity incident that resulted in approximately $9.5 million in fraudulent wire transfers. The incident was investigated, and federal authorities were able to seize a significant amount of the misappropriated funds. This event highlighted the importance of robust cybersecurity measures in the biopharmaceutical industry.
Looking ahead, Fortress remains focused on advancing its diverse pipeline of product candidates, while also exploring strategic options to optimize the value of its subsidiaries and partner companies. The company's ability to navigate the complex and highly regulated biopharmaceutical industry will be crucial to its long-term success.
Conclusion
In conclusion, Fortress Biotech, Inc. (FBIO) is a unique and diversified biopharmaceutical company with a strong track record of identifying, acquiring, and advancing innovative pharmaceutical products. The company's strategy of leveraging its network of key opinion leaders and in-house expertise has enabled it to build a robust portfolio of subsidiaries and partner companies, each contributing to Fortress' overall growth and financial performance. As Fortress continues to navigate the challenges and opportunities inherent in the biopharmaceutical industry, investors will be closely watching the company's ability to execute on its ambitious growth strategy and deliver value to its shareholders.